How did we get into this housing mess, anyway?
In her new book, author Alyssa Katz argues that ‘delusional thinking’ set the stage for the current crisis.
You may want to add this to your summer reading list: “Our Lot: How Real Estate Came to Own Us.”
Here’s an interview with the author.
If you want to understand how we got into the current housing disaster, author and journalism professor Alyssa Katz has some ideas about the decisions that led us here, starting way back in the Johnson Administration, she says in an interview with Salon.com.
You talk about another real estate bubble in the early ’70s, when everybody who wanted one could get a mortgage. The wreckage that was left behind looks totally familiar.
Yes. Rather infamously, the federal housing administration, which is the government agency that insures mortgages — it’s what built Levittown and all those 1950s suburbs after the war — discriminated very aggressively, on the basis of what was thought to be sound statistical evidence, that the insurance fund would only be safe if it were to insure suburban and overwhelmingly white areas.
So what happened in ’67 and ’68 was that federal housing officials reversed that entirely. They proclaimed, initially just in the riot areas and then more broadly across cities, that FHA, the Federal Housing Administration, would now be open everywhere! And in fact, as I note in the book, the only circumstances under which HUD did not insure mortgages is if the house is literally falling down.
Real estate agents and loan brokers descended on inner cities, trying to find borrowers who would be unlikely to pay their mortgages back, because the real-estate speculator would get paid in full by the federal government, and paid more quickly and more generously, because of forgone interest that they would get compensated for. The sooner that borrower went into foreclosure the more generously that entrepreneur would get paid.
Read more from: MSN Real Estate Blog: How President Johnson Created this Boston condo mess real estate crisis. Not to say that Barney Frank is off the hook.
Okay, what are your thoughs, total BS, or does the writer have a good point?
Please, before you make a comment read this link: The cause of our real estate problems. Over-the-top?
